How to Settle a Tax Debt for Less Than You Owe

If you owe the IRS money, they can take significant measures to collect on that debt. They may be able to seize your assets, freeze your bank accounts and garnish your wages. It may even be possible for them to collect from your estate in the event of your death. However, you do have an alternative to a life of running from the government.

How to Obtain IRS Tax Debt Relief

The first step in obtaining debt relief from the IRS is to acknowledge that you owe a debt. Many people choose to ignore warnings or other notices that they get, which may lead to fines and penalties added to the existing balance. In some cases, the government will even fill out a tax return for you without any of the credits or deductions that you may be entitled to. Once you acknowledge the debt, you can create an offer in compromise that may lower the amount that you owe or at least give you more time to pay. Another option may be to talk to a credit counseling service for help coming to an agreement with the government.

Debt Consolidation Loans May Help

Whether you owe $100 or $100,000 to the IRS, it is in your best interest to pay that money back as soon as possible. Therefore, it may be wise to look into debt consolidation loans. Debt consolidation loans allow you to borrow the money you owe to pay off that creditor in a timely fashion. You then pay off the consolidation loan according to the terms you agreed to with the lender. The advantage here is that you won’t accrue any more interest or have to pay a fee to setup a payment plan.

Tax Debt May Be Part of a Debt Management Plan

A debt management plan allows you to pay off your debts with a single monthly payment. However, unlike a consolidation loan, a debt plan sees a credit counselor or another party take your payment and disburse it to your creditors. You may be required to keep a separate bank account where you deposit money for the purposes of paying your bills. If the IRS agrees to be part of your debt repayment plan, it may agree to remove liens or waive some or all penalties and interest that have accrued on the debt.

The worst thing you can do if you owe money to the government is to ignore the problem and pretend it doesn’t exist. Through consolidation, a debt repayment plan or simply negotiating with the government, it may be possible to reduce your debt or pay it off before it is able to grow any faster. You can learn more by visiting Credit Counselling Services of Atlantic Canada.

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